It was bad. Really bad. Among the worst, in fact. But don't worry, history shows that the market recovers nicely after these big down days. See the table below for details.
Table 1. Worst 1 day market declines in order of magnitude.
This table, and those that follow, show the 74 worst 1-day market declines since 1950. Today's decline is ranked #74 out of the 17,652 trading days in the sample. That works out to the 99.6% worst day since 1950.
Table 2. Worst 1 day market declines in chronological order.
Next we look at the same data arranged in date order to get a sense of when these bad events happened. What we see is a bunching of these events in certain periods of the market, like 2008-2009 for example.
Table 3. Worst 1 day market declines by year.
These bad market days were concentrated in 23 out of the 70 years in our sample. Here are the details.
The period from 2008-2009 accounts for 27 of the 74 worst 1-day market declines, and for good reason. The world was in panic mode, wondering if the global financial system might fail. We don't have that worry today, thank goodness.
Table 4. What comes next.
This is where I can offer some reassurance that the world as we know it isn't about to end just because of today's market decline. Go back and look at table 1 and you'll see that, after big 1-day drops the market usually recovers nicely.
In fact, history tells us that after a big drop like we saw today, the market is higher by 14.5% one year later. There are exceptions, of course, and there's no guarantee that this market will recover as nicely as others did in the past.
Take February 2008 for example. The market was down by 43% 12 months later. That could happen again, but the odds say it won't. If you're a member in good standing of the Intrepid Dip-Buyers Club, and you believe in probability and history, then you should buy this dip with both hands.
For the rest of us, it's lookouts below.
Drop due to virus cutting economic growth and earnings. When appears virus contained market will soar back to where fall started. Watch trading it will tell you when to buy, buy, buy. Don’t listen to news they have no clue when to buy. Remember from the old days “the tape tells all.” Remember from new days “be greedy when others are fearful” Apply both sayings and make a lot of money. I do over and over again.
Howard Randall
Everybody has different rules and style in trading and investing. Today’s drop is just nothing. Now is more important if SPX will hold 3230 tomorrow and if it holds , then has to retrace 50% of this drop in next 3 days. If not SPX next stop will be 3027 , it’s 200 point down. We will see. Internals were week, my indicators were screaming “overbought” and new highs were not confirmed by momentum and AD line. Some stocks looked like 1998 October 2nd again . So I am not surprised that market went down. Time will tell what to do next. I totally agree with comment above. Watch the tape and remember, “YOU will never catch top and bottom”. It’s a loser’s game to find a bottom.
My advice is : have a plan with strict rules, be nimble and forget about FOMO. Technical damage was done to indexes , so will take time for repair or will give an opportunity to short. I do not have a Cristal ball, but survived all markets from 1994.
Good luck trading and investing.
Andy
I find it interesting how many say not to worry at market tops.